House price growth rate slows to 0.5%

HOUSE prices grew by just 0.5% in January, their slowest rate in a year, the latest survey of prices nationally shows.

According to the survey by PermanentTSB and the Economic Social Research Institute (ESRI), house price growth rates are showing signs of slowing down, though the average house now costs €235,156 €30,000 more than in January last year. The price of second-hand houses rose by buy just 0.2% in the month, down from 1.2% in December, but new house prices rose by 1% in January. This figure was expected to be smaller given the record number of new homes built last year.

Overall, new house prices grew by 12.5% in 2003 and 13.2% for second-hand houses. The average price paid for a new house last month was €225,805, while a second-hand house cost €241,819.

PermanentTSB's head of marketing Niall O'Grady says the moderation in the rate of growth of national prices was welcome and in line with its forecasts for a 6-8% increase in prices this year.

"Within the figures, the relative strength of prices for new houses will be of some disappointment to those who had anticipated that the record numbers of new houses built last year would see a more significant easing of the rate of growth in this sector. That doesn't appear to have been the case so far and there must be continued pressure to ensure no let-up in the house building rate for the current year," Mr O'Grady added.

A breakdown of prices across Ireland shows houses in Dublin increased in value by just 0.3% compared to 0.8% growth outside the capital. In December, Dublin prices grew by 1.3%. But a house in the city still cost €307,214 compared to an average of €205,364 in the rest of the country.

For the year to January 2004, prices in the rest of the country outstripped the Dublin rise 13% comparted to 11.8%.

While the moderation of price growth in January will be welcomed by those trying to get their foot on the property ladder, continued demand among first-time buyers has driven up the price they are paying.

House prices for first-time buyers increased by 1.1%, while prices rose by just 0.2% for second-time buyers in January 2004. Overall, they grew by 16.1% and 11.9% year on year to January 2004 for first-time and second-time buyers respectively.

The average price paid by a first-time buyer in January 2004 was €207,384 and €264,176 for second-time house buyers.